Steady leisure demand is projected to keep the airline industry positive into the next year, with adjusted capacity to make up for labor and fuel costs, said Savi Syth, analyst and managing director at Raymond James.
Although airline travel affordability is down 13.2% year-over-year, according to the October CPI report, demand for travel peak periods has been strong, and airlines are “moving quickly to adjust for those off-peak periods.”
The Transportation Security Administration reported that 2.9M people were screened at airports across the country the Sunday after Thanksgiving, “the busiest day ever for air travel.”
So far, seven out of 10 of the busiest TSA days ever have happened this year.
Airlines stocks (NYSE:DAL), (UAL), (AAL), (ALK), (JBLU) are down 30% from their highs as a group. Delta (DAL) and United (UAL), however, trade at about 4–6x earnings.
Next year, Syth said, “things [for the airline industry] are going to hold up better than the market appreciates.”
Challenges for the industry continue to be fuel prices, which are still about 50% above 2019 levels but a bit better than last year.
She also said that off-peak fare prices are not sustainable.
To address those challenges, “you’re going to see airlines adjust capacity next year.”
Her picks for stocks better positioned in this environment are Delta Airlines (DAL) and Alaska Air Group (ALK).